Section 195(2) cannot be used to declare a remittance wholly exempt; it only ines the taxable portion.

Section 195(2) of the Income-tax Act, 1961 is confined to determining the appropriate proportion of a remittance chargeable to tax, and cannot be used to obtain a declaration that the entire sum is wholly exempt. A claim of complete exemption must be addressed in the assessment of the non-resident recipient, not through an application under section 195(2). On that basis, an application seeking total exemption was misconceived, and an appeal arising from such an order was not maintainable.

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Issues: Whether an application under section 195(2) of the Income-tax Act, 1961 lies where the remitter claims that the entire sum proposed to be remitted is wholly exempt from tax, and whether an appeal arising from such an order is maintainable.

Analysis: Section 195(2) contemplates a determination of the appropriate proportion of a sum chargeable to tax where the payer considers that the whole of the sum would not be income chargeable in the hands of the recipient. The provision is confined to working out the taxable portion of the remittance and does not extend to a case where the payer asserts that no part of the amount is taxable at all. A claim of complete exemption is a matter for the assessment of the non-resident recipient, not for determination under section 195(2). Since the assessee sought a declaration that the entire remittance was exempt, the application itself was misconceived and the orders passed thereon could not support the appeal.

Conclusion: The appeal was not maintainable and the assessee's contention that section 195(2) could be invoked for a declaration of total exemption was rejected.

Final Conclusion: The statutory mechanism under section 195(2) is limited to determining the taxable portion of a remittance and cannot be used to secure a ruling that the whole amount is outside the charge to tax.

Ratio Decidendi: Section 195(2) of the Income-tax Act, 1961 applies only to ascertain the appropriate proportion of a remittance chargeable to tax and does not confer jurisdiction to declare the entire sum exempt from tax.

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